For decades, private companies and investment firms have been forbidden from advertising that they are seeking investors. On September 23, however, one of the first provisions of the JOBS Act went into effect, lifting the 80-year-old ban on general solicitation of capital investments.
Many believe the result could be a large increase in businesses' marketing and advertising their private securities offerings. Marketers should therefore be prepared to receive requests from people interested in taking advantage of the new crowdfunding provisions.
Although the lift on the ban of general solicitation may bring more business to marketers' doors, it is critical that they understand both the opportunity and risk—for themselves and their clients.
The SEC will be watching, and there are penalties for noncompliance.
I sit on the board of CF50, a global crowdfunding think tank, and the two leading trade and lobbying organizations for the industry. When attending various events throughout the country on crowdfunding and the JOBS Act, I am frequently asked for advice regarding the campaign strategies for these types of fundraises. I always share one piece of advice: Be careful.
To ensure marketers and public relations professionals stay on the right side of the law, here are four tips to follow, based on advice from active industry members.
1. Advise caution
Entrepreneurs are known for their passion and drive. They want to share their vision with the world and they're are eager to gain support. Although such passion is necessary for success, it can also lead to them making misstatements or omissions. The SEC may consider overestimating potential, misrepresenting someone's involvement, and issuing forward-looking statements as misstatements.
Take the first step (it's free).
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